First Reserve's TPC offer bested by Blackstone

Zain Shauk

Published 10:16 pm, Monday, October 8, 2012

HOUSTON -- A bidding war is shaping up over Houston-based TPC Group, the nation's leading producer of chemicals used for synthetic rubber for car tires and hoses.

After agreeing to sale terms last month at a price of $40 a share, the company said Monday it had received a new high offer of $44 to $46 in a bid backed by Blackstone Capital Partners. The offer, which would make TPC a part of fuel-related chemical company Innospec, is worth as much as $721 million, based on TPC's number of outstanding shares.

It tops the previous offer of $628 million from First Reserve Corp. of Greenwich and New York-based SK Capital Partners.

But the bidding is likely to continue, according to a note from Oppenheimer & Co. analyst Edward Yang.

"We expect the company to ultimately get sold in the $50 range," Yang wrote.

Shares rose $5.21 to close at $45.88 in Nasdaq trading Monday.

The company likely will command a higher value because of its position as a leading producer of butadiene, which is used to make synthetic rubber and recently has fallen into a shortage, Yang wrote.

TPC, formerly known as Texas Petrochemicals, controls about a third of the domestic market for butadiene.

Shareholders were not happy with the initial $40-a-share proposal accepted by TPC's board of directors -- which was only pennies above the company's $39.49 closing price on Aug. 24, the last trading day before the offer was announced.

Sandell Asset Management, a New York investment firm that owns 7 percent of TCP's shares, called the initial deal "grossly suboptimal" for shareholders.

Innospec, formerly Octel Corp., is a specialty chemicals company and the world's only manufacturer of tetraethyl lead, an additive used primarily in fuel for small planes.

First Reserve and SK Capital have declined to comment on whether they would increase their bid.